Ternium Q2 Earnings Call Highlights

Key Points

• Second-quarter profitability rebounded: Adjusted EBITDA rose 50% sequentially to a 16.5% margin, supported by higher shipments, improved prices and stronger conditions in Mexico and Brazil. Net income reached $465 million, while first-half adjusted EBITDA increased 65% year over year to $1.2 billion.
• Mexico recovery and Pesquería expansion are key growth drivers: Lower imports, restocking and market-share gains improved Mexican volumes, while the new slab facility is expected to begin operations in early 2027. Management expects third-quarter EBITDA to increase sequentially, though the facility’s earnings contribution will initially be limited during its ramp-up.
• Capital spending is set to decline: Ternium expects 2026 capital expenditures of $1.6 billion, falling to about $1.2 billion in 2027 after the Mexico investment program peaks. The company ended June with just $112 million in net debt and said higher dividends could be considered if stronger results prove sustainable.

Ternium NYSE: TX reported a sequential recovery in second-quarter profitability, supported by higher steel shipments, improved realized prices and stronger market conditions in Mexico and Brazil. The company said adjusted EBITDA increased 50% from the first quarter, while its adjusted EBITDA margin expanded to 16.5% from 12.2%.

Chief Executive Officer Máximo Vedoya said the company ended June with net debt of $112 million and expects capital expenditures to decline after reaching the peak of its investment program in Mexico. The company’s major Pesquería expansion is now primarily focused on construction of a new slab facility, which is expected to begin operations in early 2027.

Second-Quarter Results and Outlook

Chief Financial Officer Pablo Brizzio said second-quarter net income reached $465 million, driven principally by operating performance. The quarter-over-quarter increase in operating income was partly offset by weaker financial results, including foreign-exchange losses and lower deferred-tax gains.

Consolidated steel shipments rose 4% sequentially. In Mexico, shipments continued to increase as the commercial market improved, imports declined and Ternium gained market share, Brizzio said. Sales volumes in Brazil were broadly stable, as Usiminas maintained its focus on margins rather than volume, while volumes in the company’s southern region increased seasonally.

Steel segment cash operating income increased by $240 million from the first quarter, reflecting higher volumes and realized steel prices. Costs per ton rose slightly.

For the third quarter, Ternium expects adjusted EBITDA to rise sequentially on higher shipments and a higher EBITDA margin. Brizzio said revenue per ton should increase, although this is expected to be partly offset by higher costs per ton across the company’s markets.

For the first half of 2026, adjusted EBITDA totaled $1.2 billion, up 65% from a year earlier, and the EBITDA margin increased to 14% from 9%. First-half net income was $837 million, or $2.84 per American depositary share, nearly double the prior-year level, according to Brizzio.

Mexico Recovery, Trade Talks Remain in Focus

Vedoya said Mexico’s business environment has been gradually improving as government measures targeting unfair trade practices help steel volumes recover. He said restocking in the commercial value chain helped bring inventories closer to more balanced levels, while lower imports and Ternium’s service capabilities contributed to market-share gains.

Demand from industrial customers has improved more slowly. The automotive sector remains healthy, while heating, ventilation and air-conditioning demand has benefited from data-center investment, Vedoya said. However, U.S. Section 232 tariffs continue to affect manufacturing customers in Mexico and have contributed to a different product mix, with commercial-market shipments representing a larger share of sales.

In response to an analyst’s question, Vedoya said Ternium expects improved price realization in the third quarter, though it does not expect major changes in the sales mix. He characterized Mexican steel demand growth as modest, citing an expected 4% increase in steel consumption this year after consumption fell 10% in 2025.

The company also expects demand from public infrastructure projects to develop over time. Vedoya said Ternium is discussing projects totaling roughly 600,000 to 700,000 tons under an agreement with the Mexican government and steel industry, though he said those projects would take at least one to two years to develop rather than adding substantial demand in a single quarter.

U.S. and Mexican officials held three meetings during the past month regarding a new trade framework, with a fourth round scheduled in Washington in early September. Vedoya said Mexico is seeking the removal of Section 232 tariffs, while the U.S. is seeking stronger Mexican protections against unfair trade. He said progress on both issues could benefit Ternium and the Mexican market.

Pesquería Ramp-Up and Capital Allocation

The Pesquería slab facility is expected to strengthen Ternium’s ability to supply North American customers with locally produced steel, shorter lead times and technical support, Vedoya said. The company expects the facility’s steel to have a lower carbon footprint than blast-furnace-based steel that supplies much of the region’s automotive market.

Still, management cautioned that the facility’s impact on 2027 earnings should be limited initially. Vedoya said the mill’s ramp-up will take several quarters, and automotive certifications for more than 2.5 million tons of production will require time. He said Ternium has received more customer inquiries about switching supply to Pesquería than the facility’s available capacity.

Capital expenditures were $837 million during the first half, primarily reflecting the Pesquería expansion. Brizzio said the company expects full-year 2026 capital expenditures of $1.6 billion, declining to about $1.2 billion in 2027.

During the second quarter, Ternium paid $255 million in dividends, representing the balance of the dividend declared for fiscal 2025. Brizzio said the company could consider higher dividends if improved results prove sustainable, while maintaining a strong balance sheet to support future opportunities. He also said Ternium’s long-term objective includes simplifying its corporate structure, though certain conditions make action involving Usiminas shares difficult in the near term.

Brazil, Argentina and Sustainability Targets

In Brazil, Vedoya said trade protections have advanced. The country renewed its steel quota system through June 2027, and an anti-dumping case involving Chinese hot-rolled coil is expected to receive a final decision this year. Automotive production is expected to grow 6% in Brazil this year, while road and infrastructure equipment demand remains active, he said.

Usiminas has improved profitability through industrial performance, cost controls and productivity gains, Vedoya said. He highlighted completion of a pulverized-coal-injection project, which he described as improving efficiency, reducing costs and lowering emissions intensity.

In Argentina, shipments rose sequentially, largely because of seasonality. Vedoya said Ternium continues to see energy, mining and agriculture as the strongest sectors, while construction is recovering gradually from low levels and manufacturing remains weak amid soft demand and import competition.

Ternium also updated its 2030 decarbonization target in its 2025 sustainability report. The target now includes Usiminas and uses 2024 as its base year. The company aims to reduce emissions intensity per ton of hot-rolled steel by 50%, covering Scope 1, Scope 2 and Scope 3 emissions under the Greenhouse Gas Protocol methodology.

About Ternium (NYSE:TX)

Ternium SA NYSE: TX is a leading vertically integrated steel producer with operations across the Americas. The company manufactures a broad range of flat and long steel products, including hot‐rolled and cold‐rolled coils, galvanized and tin-coated sheets, plates, rebars, wire rods, bars and structural sections. These products serve diverse end markets such as automotive, construction, energy, industrial machinery, home appliances and packaging.

Established in 2005 through the consolidation of steel assets in Argentina and Mexico, Ternium has grown to operate major production facilities in Argentina, Brazil, Mexico, Colombia, Central America and the United States.

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